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OPINION: Want BC to be fiscally responsible? Invest in people, communities and our future


Canadian Centre for Policy Alternatives

What does it mean for governments to be fiscally and economically responsible today and in an eventual post-pandemic world?

During the initial phase of the pandemic, there was a brief period of cross-party agreement on the need for large-scale emergency public spending. This temporary agreement, however, obscured a pre-existing problem: long-term underinvestment in key public services and infrastructure—a shortfall that is economically and socially destructive.

As just one example, the recent catastrophic floods in British Columbia show the urgent need for massive public investment to strengthen and adapt our infrastructure in response to climate change. 

For decades, “fiscal responsibility” has been too often equated with cutting or constraining public spending. But a growing body of evidence tells us that public spending comes with major economic benefits including higher productivity and growth, spurring private investment and adding more jobs. 

This evidence includes a wide range of research, such as a recent analysis by economists from the International Monetary Fundexamining 17 OECD countries (including Canada) that finds public investment “raises output in both the short and long term, crowds in private investment, and reduces unemployment, with limited effect on the public debt ratio.” 

An academic meta-analysis of 68 studies on the productivity of public investment arrives at a similar conclusion, finding that “public capital is undersupplied in OECD economies.”

The case for increased public investment is also clear in specific policy areas. For example, creating a universal public child care system would not only save families thousands of dollars per year, but also increase economic growth and tax revenues by allowing more women to participate in the labour force and by directly creating child care jobs.

Scarce and unaffordable housing drives up costs and limits opportunities for workers and businesses alike, and public investments to help address this problem would have large economic payoffs. Studies show that housing people who are experiencing homelessness is highly cost-effective. More broadly, failure to address poverty comes at a huge economic cost.

Public investment in mass transit boosts incomes and growth by unlocking economic benefits that emerge when many individuals and businesses are located together in cities. Research also shows that each year of delay in action on climate change comes at significanteconomic cost, a reality that BC’s recent floods clearly reinforce. 

In addition, expanding investment in universal public health care can bring major efficiency gains compared to maintaining the wasteful for-profit elements of health care that have gained a significant foothold in Canada. For example, implementing universal public pharmacare would save billions of dollars per year across the economy. 

In short, chronic underinvestment in public services and infrastructure hurts our long-term economic productivity and growth and will slow down the pandemic recovery effort. 

To be sure, the BC government has made important new social and environmental investments in recent years. Still, its most-recent budget does not, in the years ahead, plan to reverse the long-term decline in provincial public spending as a share of GDP. In fact, if we returned provincial operating spending to the levels of two decades ago (as a share of GDP), we’d have billions of dollars more available each year to invest in urgent priorities. 

BC needs to break out of a budgetary framework that is focused on constraining medium- and long-term public spending. We must invest more together to meet the major challenges of our time—climate change, housing, child care, poverty and toxic drugs, among others—because it is right and because failing to do so would be economically and fiscally irresponsible.

Alex Hemingway is a Senior Economist at the Canadian Centre for Policy Alternatives.

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